As of December 2019, India ranks the second highest in the number of Internet users with about 560 million users, according to reports from Statista. And, this number is estimated to reach up to 650 million by 2023. Even though India holds such extensive internet users, its internet penetration rate in 2020 accounted for only 50%. However, the rate has come a long way from 4% in 2007.
Ecommerce may be flourishing across India; however, losses are the parts and parcels of life for ecommerce sellers in India. The uncompromising coronavirus outbreak in India had led to multiple lockdowns. The growth rates of ecommerce businesses during these times were dropped to a single digit. The declining growth rate and sizable monetary loss affected not only the large-scale businesses but most importantly to the small-scale sellers and enterprises in the ecommerce market. In this blog, we will be discussing the reasons why the ecommerce industry in India is facing losses.
Why ecommerce businesses face losses in India?
Ecommerce is swiftly becoming the most popular and most accepted form of business across the globe. Day after day, more and more people are switching to online shopping to purchase various things from every day groceries to precious and expensive products. As the number of online consumers increases, there is a storm of ecommerce service providers in India. However, right from its inception, ecommerce has been very difficult and a sector attracting losses due to lack of benign environment and amorphous nature.
There is no one definite reason why the ecommerce industry in India is facing loses – there are many! The matter of fact is that the four major players of the Indian ecommerce marketplace, Amazon, Flipkart, Snapdeal, and Paytm Mall, had reported a collective loss of Rs. 10,879 Crores in the financial year 2018-19. Among them, Amazon had reported a net loss of Rs. 5685 Crores Flipkart for Rs 3837 Crores, Snapdeal for Rs. 1171 Crores, and Paytm Mall for Rs. 186 Crores respectively in the same financial year. These stats are clearly contradictory to the predictions of a rise in the ecommerce business to $120 billion by 2020. Now let us look into the possible reasons behind the downfall of ecommerce in India.
The predictions of about 26% growth in the ecommerce Industry pre-Covid was blurred due to the restrictions imposed and the precautionary measures that had to be taken at the hour. During the initial stages of the lockdown, almost every business was shut down, stocks were insufficient, and so were the falling consumer demands. With the Junta curfew in action, the transport of goods and services was at a halt. The authorities were forced to shut their warehouses and the deliveries were banned nationwide.
Soon after, the central and the state authorities intervened in the matter, allowing ecommerce businesses to restart with limited operations that included the selling of only essential goods and services. The Corona wave and the lockdowns together worked against many small and medium-scale businesses. Factors that affected the ecommerce businesses in India due to this include disturbance and shortage in the supply chains, limited investment from the customers, and lack of the most essential products during the time. Last year stats for non-essential goods summed up to $32 billion which was equivalent to 70% of the online sales in the country.
The growth of the ecommerce industry in 2020 is expected to come to a deadlock of only 5%, which was earlier expected to be a whopping 26% growth. Although online grocery shopping is at the peak, ecommerce growth sees no difference as the grocery sector contributes only 6% to the comprehensive Gross Merchandise Value or GMV. Another growing sector, personal care, and hygiene also witnessed significant growth, which sadly also contributes only 4.5% to the overall GMV for ecommerce platforms. While the liberation in the rules and regulations liquefied the supply chain, the demand for online goods and services is still cold.
The two most important ecommerce players in India, Amazon, and Flipkart had witnessed losses when the FDI policies for online marketplaces were updated last year. Right when the ecommerce businesses had started to execute businesses with the new normalcy, the virus hit them hard, irrespective of the size of the company. With the gradual growth in the ecommerce sector, the threat of ecommerce frauds also hiked. If online organizations do not stay vigilant and proactive to create robust solutions to stop malicious activities from fraudsters, the sector must be ready to boost their percentage of losses.
Conclusion
Amazon and Flipkart have their unique set of strategies to expand their individual businesses in the Indian Market. Amazon has significantly invested in offline assets to establish and expand their presence and to overcome their losses due to all given reasons. Similarly, Flipkart has considerably invested in many resources to aggressively expand its reach in the Indian online market. The sustained losses in the ecommerce industry are unlikely to continue in the long run. No matter what, every ecommerce business is thriving in the market like a pro. Moreover, online shoppers are inclining towards online shopping than offline shopping in order to maintain safe distances from public places.
The sectors of the Indian population who never trusted and invested in the online ecommerce businesses are today searching for online services to cope with the current pandemic situation. And, that exactly is the reason why ecommerce is never dooming in the Indian markets. With over 135 crores of the Indian population, the ecommerce industry is set to sky rocket. If you are planning to jump into the ecommerce business, it is the perfect time to invest. Also, creating an amazing ecommerce platform is now at your fingertips. Without being a technical expert, you can create a beautiful ecommerce store with Builderfly. Moreover, the free Starter Plan of Builderfly lets you build your store, add your products, connect your domain, and start your online selling business for free. All you do is register, design, and start selling!
